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Iran's Failed Foreign Policy MEI Policy Paper 2015-1 Iran’s Failed Foreign Policy: Dealing from a Position of Weakness Thomas Juneau Middle East Institute April 2015 Policy Papers Series Cover photo: Iranian Foreign Minister Mohammad Javad Zarif (center) stands with members of the P5+1 to announce the framework of an agreement on the Iranian nuclear program, April 2015. © 2015 The Middle East Institute MEI Policy Paper 2015-1 Iran’s Failed Foreign Policy: Dealing from a Position of Weakness Thomas Juneau Middle East Institute Policy Papers Series Contents 1 About the Author 2 Introduction 3 Iranian Power: Less than Meets the Eye 5 Not a Major Player in Yemen 8 Troubles in the Levant 9 Partial Success in Iraq 11 The Nuclear Program: Costly Benefits 14 Darkening Clouds 19 Dealing from a Position of Weakness 20 Endnotes About the Author homas Juneau is an assistant professor at Tthe University of Ottawa’s Graduate School of Public and International Affairs. From 2003 to 2014, he was an analyst with Canada’s Department of National Defence. Iran’s Failed Foreign Policy 1 Introduction ran’s ambition is to be the dominant state in the Persian Gulf and an Iindispensable regional power in the broader Middle East. This is a plausible aspiration. Iran’s potential assets include a large population, a central geographic position, and a wealth of hydrocarbon resources. Despite facing favorable regional circumstances after 2001, however, Iran failed to fulfil this ambition. Iran’s power is brittle: its conventional military is increasingly obsolescent, its economy is strangulated by sanctions and mismanagement, and the country is more diplomatically isolated than it has been for decades. Iran has mostly developed a narrow power base that enables it to engage in spoiling tactics and to deny opportunities to its adversaries. As a result, Iran’s influence—its ability to actually shape the regional environment in the direction it favors—is heavily constrained. This paper explains why Iran is not a rising regional hegemon, as one often hears, but rather a mid-sized regional power frustrated at not reaching its ambitions.1 It analyzes the brittleness of Iran’s power and explains how this constrains its ability to influence regional developments, especially in Yemen, the Arab-Israeli conflict, Iraq, and the ongoing civil war in Syria. The report also explains how Iran’s nuclear program has been excessively costly despite the limited gains it has brought the country. Even more worryingly for Iran, the situation is unlikely to improve in coming years, as a number of regional trends are set to perpetuate or even worsen the constraints on its ability to project its influence. This has important implications. As it continues negotiations with the P5+1 (the five permanent members of the UN Security Council—China, France, Russia, the United States, and the UK—and Germany) on its nuclear program, Iran is dealing from a position of significant and growing weakness, not strength. The status quo is, for the Islamic Republic, excessively and increasingly costly. Tehran’s optimal outcome from these talks has thus not been to consolidate its regional preponderance but rather to cut its losses after years of mounting sanctions and isolation. In approaching the next and potentially final stages of 2 Juneau the nuclear negotiations, the United States is in a position of strength. Pressure has worked: the Islamic Republic has been contained. It is militarily weak, economically strangulated, and diplomatically isolated. Iranian Power: Less than Meets the Eye Iran faced favorable regional circumstances after 2001. This window of opportunity was created by the convergence of many beneficial factors, namely the collapse of two neighbors that had served as checks on Iranian power projection, Afghanistan in 2001 and Iraq in 2003; the rise of close allies, especially Hezbollah, Hamas, and groups in post-Saddam Iraq; the drop in U.S. regional legitimacy and the increasing appeal of Iran’s policies; and the rise in oil prices. Yet Iran failed to consolidate these gains. The growth in Iranian power—the assets it can bring to bear upon its foreign policy—came mostly from unconventional elements, while hard aspects of Iran’s power—wealth and conventional military capabilities—declined. As a result, Tehran has painted itself into a corner by accumulating a narrow band of tools that increasingly restricts the influence it can achieve. This is most obvious with Iran’s armed forces. Its major weapons systems are increasingly obsolescent and suffer from low serviceability and reliability rates and critical spare parts shortages. Iran’s military strengths instead lie in its unconventional capabilities, especially its ability to support militant groups across the region, its missile arsenal, and its ability to inflict damage to military and commercial fleets in the Persian Gulf. These assets allow Iran to adopt policies of deterrence, denial, interdiction, and spoiling, but rarely to shape events. These major weaknesses are unlikely to be resolved in the foreseeable future, largely because of sanctions, resource constraints, and the cumulative effect of decades of underinvestment.2 Iran’s economy represents its second major weakness. It is stagnating, dependent on oil, beset by corruption and mismanagement, and suffocated by sanctions. Unilateral U.S. sanctions, in particular, have made it increasingly costly for Iranian businesses to access the international financial and banking Iran’s Failed Foreign Policy 3 systems. Since 2011, the EU has also adopted “Iran is sanctions that have surprised Iran by their severity. Most strikingly, in 2012 Brussels militarily weak, banned European refineries from importing Iranian oil. Like the United States, the EU economically also adopted restrictions banning the selling strangulated, and of insurance for the shipping of Iranian oil. As a result, Iran’s oil production fell to under diplomatically three million barrels per day (bpd) in 2013, its lowest level since 1990 and less than half the isolated.” levels before the 1979 revolution. Iran now has an export capacity of only one million bpd, down from 2.3 million in 2011, a drop in revenue of $60 billion per year. The Iranian riyal lost half its value against the U.S. dollar in 2012. Inflation, in double digits for years, is likely to remain high for the foreseeable future. Unemployment and underemployment, already high, are rising, causing growing discontent. The recent drop in oil prices further worsens Iran’s bleak economic outlook; by some accounts, Iran’s revenues are set to decline by $30 billion in 2015.3 The situation is worsening. The IMF calculates that though Iran’s economy grew between 6 and 8 percent per year from 2002 to 2007 thanks to high oil prices, growth has since stalled and was even negative in 2012 and 2013 (-6.5 and -1.9 percent). The Fund forecasts that on current trends, growth will average only about 2 percent between 2015 and 2019. Because of the country’s demographics, low growth results in rising youth unemployment. Prolonged stagflation, the combination of stagnating growth with high inflation, is a real threat.4 All has not been bleak for the Islamic Republic. The appeal of its opposition to the U.S.-dominated regional order increased throughout the Middle East after 2001. The occupation of Afghanistan and Iraq, the war on terrorism and its symbols such as Guantanamo and Abu Ghraib, and U.S. support for Israel created a pool of resentment into which Iran could tap. Iran’s ability to use this as a source of leverage reached a peak around 2006-2007, when U.S. troubles 4 Juneau in Iraq were most pronounced, and in the wake of the 2006 war between Israel and Hezbollah.5 As with other elements of its power, however, the gains that Iran has made through the appeal of its policies were brittle and have since declined. The repression of protests after the controversial 2009 elections, for example, tainted Iran’s reputation. Tehran’s support for the Bashar al-Assad regime in Syria has also been damaging. A poll conducted by the Pew Research Center in 2013 found that majorities in Muslim countries had negative opinions of Iran, including 81 percent in Jordan, 78 percent in Egypt, and 55 percent in the Palestinian Territories, much higher proportions than in 2006.6 Iran’s failed attempt to stake a moral leadership claim in the Arab uprisings illustrates the limits of its appeal. It initially labelled them as an “Islamic awakening” inspired by its own revolution, but it was not able to shape events in any of them. Even in Bahrain, where a restive Shi‘i majority took to the streets to protest against oppression by a Sunni regime, protesters did not look to the Islamic Republic as a model to emulate. Not a Major Player in Yemen Taking advantage of Yemen’s fractured and weak government, the Houthis emerged from their northern base and seized Yemen’s capital, Sana, in September 2014. As they steadily expanded their control, the weak president, Abdu Rabbu Mansour Hadi, fled Sana in February 2015, precipitating an escalation of violence that morphed into civil war.7 In late March 2015, Saudi Arabia assembled a coalition of ten mostly Arab states to launch air strikes with the objectives of weakening the Houthis and reinstating Hadi. Given the Houthis’ ties to Iran, these events have created an opening for predictably overblown accusations that Tehran has taken over yet another Arab country. The Houthis, however, are not Iranian proxies; Tehran’s influence in Yemen is in fact marginal. The civil war in Yemen is driven first and foremost by local political factors; it is at its base neither an international proxy war nor a sectarian confrontation. Iran pursues a variety of objectives when it decides to support sub-state actors throughout the region.
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